Wednesday, 16 October 2013

Abbott Laboratories Q3 2013 Results

Abbott announced this morning a 57%
increase in its dividend, demonstrating confidence in the long-term growth of
the company and their commitment to increasing shareholder returns. This
declaration increases the company’s quarterly dividend to $0.22 per share from
$0.14 a share, effective with the dividend to be paid in February 2014.

Total company sales increased 4.3%,
operationally, but excluding the sales disruption in International Nutrition,
sales would have increased approximately 6%. Sales growth in International
Nutrition was affected by the supplier recall initiated in early August in
China and two other markets for certain pediatric nutritional products.

Diagnostics delivered double-digit
growth and Medical Devices delivered nearly 4% growth with double-digit growth
in Medical Optics. Abbott again saw a strong growth in emerging markets and
also began to see better performance in developed markets.

Diagnostics, one of Abbott’s most
durable growth businesses, increased more than 6% in developed markets with
double-digit growth in point-of-care and strong growth in U.S. Core Laboratory
Diagnostics, driven by several large customer account wins.

Medical Optics, also contributed to the
company’s improvement in developed markets, growth of Cataract business has accelerated
over the last three quarters, driven by new product launches, including the
TECNIS Toric in the U.S. and TECNIS OptiBlue in Japan.

In Established Pharmaceuticals this
quarter, sales increased modestly. While recent macroeconomic and market
pressures in certain emerging markets resulted in somewhat lower sales growth
this quarter, growth rates in emerging markets have been and are expected to
continue to be higher than the growth rates of the developed world of the
overall global economy.

Established Pharmaceuticals remains well
aligned with the fundamentals driving long-term growth in emerging markets,
rising middle-class, improving access to healthcare consumers that are seeking
and willing to pay for high-quality brands. Emerging markets projected drive,
70% of the global pharmaceutical growth over the next several years, the
majority of that growth will be from branded generics.

Sales increased 4.3% on an operational
basis that is excluding an unfavorable 2.3% impact from foreign exchange. The sales
disruption in Abbott’s International Nutrition business is estimated to have
reduced its worldwide sales growth by nearly 2%. So sales would have increased
around 6% without this event.

Outlook
for the Full Year 2013:

Today Abbott confirmed its ongoing full
year earnings per share guidance range of about $1.98 to $2.04 reflecting
double-digit growth. Based on current exchange rates, the company would expect
exchange to have a negative impact of around 2% on full year reported sales.
This would result in reported sales growth in the low single digits. The company
forecast an ongoing adjusted gross margin ratio for the full year of
approximately 55.5% percent of sales, ongoing R&D at around 6.5% of sales
and ongoing SG&A expense of somewhat more than 30% of sales.

Abbott also forecast the full year net
interest expense of approximately $100 million, non-operating income of around
$50 million and around $40 million of expense on the exchange gain/loss line. As
previously indicated, the company forecast the full year ongoing tax rate of
19%.

Outlook
for the Fourth Quarter of 2013:

Operational sales growth is expected to
be in the low-to-mid single digits, which includes the impact of the Nutrition
disruptions. At current exchange rates, the company would expect roughly 3%
negative impact from exchange and forecast an ongoing adjusted gross margin
ratio in the fourth quarter of approximately 55.5% of sales. Abbott also
forecast an ongoing tax rate of 19% for the fourth quarter, in line with the
year-to-date rate.

Lastly, similar to the third quarter, the
company expects the recent sales disruption in its International Nutrition
business to impact ongoing earnings per share by approximately $0.05 in the
fourth quarter, which is factored into the company’s forecast.